- 1 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 3RD DAY OF SEPTEMBER, 2025 BEFORE THE HON'BLE MR. JUSTICE M.NAGAPRASANNA WRIT PETITION NO. 20069 OF 2024 (GM-RES) C/W WRIT PETITION NO. 19080 OF 2024 (GM-RES) IN WP No. 20069/2024 BETWEEN: 1. MR. MATHILAKATH ACHUTHAN ANAND, AGED ABOUT 52 YEARS, FORMER DIRECTOR OF PETITIONER NO.3, RESIDING AT: 31/2, JANAKIRAM COLONY, ARUMBAKKAM, CHENNAI – 600 106, TAMIL NADU, INDIA. 2. MS. LALITHA NATARAJAN, AGED ABOUT 54 YEARS, FORMER COMPANY SECRETARY OF PETITIONER NO.3, RESIDING AT NO.20, OLD NO.11, KARUNANIDHI, 3RD STREET KOTTUR, CHENNAI – 600 085, TAMIL NADU, INDIA. 3. AB MAURI INDIA PRIVATE LIMITED, A COMPANY INCORPORATED UNDER THE COMPANIES' ACT, 1956, HAVING REGISTERED OFFICE AT: Digitally signed by NAGAVENI Location: High Court of Karnataka - 2 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 PLOT NO. 218/219, BOMMASANDRA JIGANI LINK ROAD, RAJAPURA HOBLI, JIGANI, ANEKAL TALUK, BENGALURU, KARNATAKA – 560 105, REPRESENTED BY ITS AUTHORISED REPRESENTATIVE MR.DEEPAK SHASTRY. …PETITIONERS (BY SRI DHYAN CHINNAPPA, SR.ADVOCATE FOR SRI. MOHAMMED SHAMEER, ADVOCATE) AND: 1. REGISTRAR OF COMPANIES, KARNATAKA THROUGH MS. N.HEMLATHA, ASSISTANT REGISTRAR OF COMPANIES, KARNATAKA KENDRIYA SADAN, 2ND FLOOR, “E” WING, KORAMANGALA, BENGALURU, KARNATAKA – 560 034. 2. THE REGIONAL DIRECTOR (SOUTH EASTERN REGION) THROUGH REGIONAL DIRECTOR, MINISTRY OF CORPORATE AFFAIRS, 3RD FLOOR, CORPORATE BHAWAN, NEAR CENTRAL WATER BOARD, BANDLAGUDA, HYDERABAD, TELANGANA – 500 068. 3. REGISTRAR OF COMPANIES, CHENNAI THROUGH ASSISTANT REGISTRAR OF COMPANIES, OFFICE OF THE REGISTRAR OF COMPANIES, SHASTRI BHAWAN II FLOOR, 26 HADDOWS ROAD, CHENNAI – 600 006. - 3 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 4. UNION OF INDIA, MINISTRY OF CORPORATE AFFAIRS, E WING, 2ND FLOOR, KENDRIYA SADANA, KORMANGALA, BENGALURU – 560 034, KARNATAKA. ALSO AT: A WING, SHASTRI BHAWAN, RAJENDRA PRASAD ROAD, NEW DELHI – 110 001. …RESPONDENTS (BY SRI K.ARVIND KAMATH, ADDL.SOLICITOR GENERAL OF INDIA A/W SRI M.N.KUMAR, CGSPC) THIS WP IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO SET ASIDE / QUASHING THE COMPOUNDING NOTICE (ANNEXURE-A BEARING REFERENCE NUMBER F.NO. ROCB/S.217(3)/AROC (N.H) Z01600482/AB MAURI/FU/2024 DTD. 13.07.2024 ISSUED BY THE R-1; DIRECTION PROHIBITING ANY ACTION, PROSECUTION, INQUIRY OR LEGAL PROCESS TO BE INITIATED / CONTINUE PURSUANT TO THE SCRUTINY NOTICE (ANNEXURE-D DTD. 18.09.2012 ISSUED BY THE R-3); DIRECT THE R-2 TO DECIDE THE SHIFTING APPLICATION (ANNEXURE- G APPLICATION DTD. 27.01.2023 FILED BY THE P-3) WITHIN 15 (FIFTEEN) DAYS AND WITHOUT REFERENCE TO THE - 4 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 SCRUTINY NOTICE AND ANY FURTHER ACTION / STEPS UNDER / PURSUANT TO THE SCRUTINY NOTICE AND THE COMPOUNDING NOTICE. IN WP NO. 19080/2024 BETWEEN: 1. MR.MATHILAKATH ACHUTHAN ANAND, AGED ABOUT 52 YEARS, FORMER DIRECTOR OF PETITIONER NO.3 RESIDING AT: 31/2, JANAKIRAM COLONY, ARUMBAKKAM, CHENNAI - 600 106, TAMIL NADU, INDIA. 2. MS. LALITHA NATARAJAN, AGED ABOUT 54 YEARS, FORMER COMPANY SECRETARY OF PETITIONER NO.3 RESIDING AT: NO.20, OLD NO.11, KARUNANIDHI, 3RD STREET, KOTTUR, CHENNAI - 600 085, TAMILNADU, INDIA. 3. AB MAURI INDIA PRIVATE LIMITED, A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956, HAVING REGISTERED OFFICE AT: PLOT NO.218/219, BOMMASANDRA JIGANI LINK ROAD, RAJAPURA HOBLI, JIGANI, ANEKAL TALUK, BENGALURU, KARNATAKA – 560 105, REPRESENTED BY ITS - 5 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 AUTHORISED REPRESENTATIVE MR. DEEPAK SHASTRY. ...PETITIONERS (BY SRI DHYAN CHINNAPPA, SR.ADVOCATE FOR SRI. MOHAMMED SHAMEER, ADVOCATE) AND: 1. REGISTRAR OF COMPANIES, KARNATAKA, THROUGH MS. N.HEMLATHA, ASSISTANT REGISTRAR OF COMPANIES, KARNATAKA, KENDRIYA SADAN, 2ND FLOOR, “E” WING, KORAMANGALA, BENGALURU, KARNATAKA – 560 034. 2. THE REGIONAL DIRECTOR (SOUTH EASTERN REGION), THROUGH REGIONAL DIRECTOR, MINISTRY OF CORPORATE AFFAIRS, 3RD FLOOR, CORPORATE BHAWAN, NEAR CENTRAL WATER BOARD, BANDLAGUDA, HYDERABAD, TELANGANA – 500 030. 3. REGISTRAR OF COMPANIES, CHENNAI, THROUGH ASSISTANT REGISTRAR OF COMPANIES, OFFICE OF THE REGISTRAR OF COMPANIES, SHASTRI BHAWAN, II FLOOR, 26 HADDOWS ROAD, CHENNAI - 600 006. 4. UNION OF INDIA, MINISTRY OF CORPORATE AFFAIRS, - 6 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 E WING, 2ND FLOOR, KENDRIYA SADANA, KORMANGALA, BENGALURU – 560 034, KARNATAKA. ALSO AT: A WING, SHASTRI BHAWAN, RAJENDRA PRASAD ROAD, NEW DELHI - 110 001. ...RESPONDENTS (BY SRI K.ARVIND KAMATH, ADDL.SOLICITOR GENERAL OF INDIA, A/W SMT. B.G. NAYANA TARA, CGC) THIS WP IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO A) DIRECTION SETTING ASIDE/QUASHING THE COMPOUNDING NOTICE (ANNEXURE-A - BEARING REFERENCE NUMBER F. NO. ROCB/S.211/AROC (N.H) Z01600482/AB MAURI/FU/2024 DATED 1 JULY 2024 ISSUED BY THE R1; B) DIRECT THE R2 TO DECIDE THE SHIFTING APPLICATION (ANNEXURE-E APPLICATION DATED 27 JANUARY 2023 FILED BY THE PETITIONER NO. 3 WITHIN 15 (FIFTEEN) DAYS. THESE PETITIONS, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: - 7 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 CORAM: HON'BLE MR. JUSTICE M.NAGAPRASANNA ORAL ORDER Petitioners are at the doors of this Court calling in question the compounding notices issued by 1st respondent on 01.07.2024 and 13.07.2024 and consequently seeks a direction prohibiting the petitioners from being proceeded against in any manner and as a consequence thereof, seeks a direction by issuance of a writ in the nature of mandamus directing the application of shifting to be decided. 2. Heard Sri. Dhyan Chinnappa, learned senior counsel for Sri. Mohammed Shameer, learned counsel for the petitioners in both petitions, Sri.K.Arvind Kamath, learned Additional Solicitor General of India for Sri. M.N.Kumar, CGSPC and Smt. B.G. Nayana Tara, learned CGC for respondents in W.P.No.20069/2024 and W.P.No.19080/2024, respectively. 3. Facts in brief germane are as follows: 3.1. The 3rd petitioner is a Company incorporated with the Registrar of Companies Act, Kolkata, and subsequently the - 8 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 registered office of the 3rd petitioner was transferred from Kolkata to Tamil Nadu. On 18.09.2012, the 3rd petitioner receives a scrutiny notice from the 3rd respondent under Section 234(1) of the Companies Act, 1956, wherein a part of enquiry inter alia the petitioners were asked to explain the status of the dispute relating to income tax and its arrears in the financial statement. In the scrutiny notice, it transpires that there was no mention of any alleged qualification in the auditor's report or regarding any failure in the remittance of service tax or any income tax liability pending in the 3rd petitioner's balance sheet of 2011. 3.2. The 3rd petitioner is said to have filed an application seeking to shift its registered office from the State of Tamil Nadu to Karnataka and generates correspondence on this regard. The application of the 3rd petitioner seeking transfer of its registered office from the State of Tamil Nadu to Karnataka comes to be allowed on 22.11.2012. No further correspondence is made by the respondents regarding the scrutiny notice pursuant to the allowing of the application of the 3rd petitioner on 22.11.2012. Thereafter, on 27.01.2023, the 3rd petitioner - 9 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 files an application under Section 13(4) of the Companies Act, 2013 read with Rule 30 of the Companies (Incorporation) Rules, 2014 before the 2nd respondent, seeking to transfer its registered office from the state of Karnataka to the state of Haryana. Reminders galore from the hands of 3rd petitioner since no order is passed by the 2nd respondent. 3.3. The 3rd petitioner then wanting to know the status of the application for shifting so filed, files an application on 29.04.2024, under the Right to Information Act, 2005 (hereinafter referred to as the 'RTI Act') seeking divulgence of the status of the application of 3rd petitioner for the purpose of shifting. In reply, it was indicated that the shifting application is pending as there was an 'inquiry follow up' pending against the 3rd petitioner and the reply further stated that it could not be disclosed in terms of Section 8(1)(h) of the RTI Act. 3.4. The petitioners then preferred an appeal before the Appellate Authority challenging the order passed by the respondent Nos.1 and 2 in not divulging the complete information. It transpires that two compounding notices dated 01.07.2024 and 13.07.2024 are issued to the petitioners - 10 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 directing the petitioners to file compounding application within seven days from the compounding notices for alleged offence under Section 217(3) of the Companies Act, 1956. The compounding notices are issued only to petitioner Nos.1 and 2 and not the 3rd petitioner. The 1st petitioner is said to have left the employment of the 3rd petitioner on 28.02.2013 and the 2nd petitioner on 31.12.2012. Therefore, the petitioner Nos.1 and 2 have not received any correspondence with regard to the present dispute prior to the first compounding notice and the present impugned compounding notices. The notice is said to have been issued after 12 years with a threat of prosecution and therefore, the petitioners are before this Court in the subject petitions. 4. Learned senior counsel appearing for the petitioners would contend that the notice impugned clearly indicates that the proceedings of 2011 and 2012 are sought to be directed to be compounded in the year 2024. He would contend that if it is allowed to stay, the scrutiny notice and the compounding notices would have far reaching consequences and would cause irreparable injury to the petitioners. Learned senior counsel - 11 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 submits that the scrutiny notice or issuance of any show cause notice by the Registrar of Companies, Karnataka, cannot now be permitted to be acted upon, as no action is taken on the notice for the last 12 years. In terms of law, the petitioners are not legally bound to maintain records for more than eight years. Therefore, consequence of permitting the compounding notices to remain, would be to permit prosecution on a belated claim by the respondents. He would seek quashment of the compounding notices. 5. Per contra, the learned Additional Solicitor General of India, appearing for the respondents, would seek to defend the action of issuance of the impugned compounding notices. It was not on certain administrative delay and hence, enquiry against the petitioners must be permitted. The reasonable time would not become applicable to criminal prosecution under the Act. All that the respondents had now directed is to come forward to compound the offence. No prejudice would be caused to the petitioners if they are directed to appear before the authority and compound the offence. He would seek dismissal of the petitions. - 12 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 6. Learned counsel appearing for the petitioners would join issue in contending that the submission learned Addl. Solicitor General of India would make at the first blush looks simple but if the proceedings are hit by delay, it is ununderstandable as to why the petitioners should face proceedings even for compounding as the compounding would mean acceptance of the offence for its closure. He would now place reliance upon several judgments to buttress his submission. 7. I have given my anxious consideration to the submissions made by the learned counsel for the parties and have perused the material on record. 8. The aforesaid facts linked in the chain of events and the dates are all a matter of record. The 3rd petitioner had filed an application seeking to shift its registered office from the state of Karnataka to the state of Haryana. The shifting application goes into oblivion. Therefore, the 3rd petitioner files an application under the RTI Act seeking to know the status of - 13 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 the shifting application. The genesis of the problem in the subject petitions is from this stage. The information sought in the reply is as follows: "To, Shri Biswanath Manna, Flat No.M8A, Adani Samsara, Sector-60, Gurgaon-122002. Sub:- Information sought under the RTI Act-reg. Sir, Please refer to your 02 RTI application's both dated 29.04.2024 on the similar lines received in this office on 02.05.2024 and 06.05.2024 respectively on the subject cited above and to state that the information as requested by you are as under:- Point No. Information Sought Reply 01 What is the status of the Shifting Application filed by the company seeking shifting of its registered office from state of Karnataka to Haryana? Reply to the Point No.1:- Pending. 02 Is there any pending inquiry/investigation against the company? 03 In case there is a pending inquiry/investigation against the company, what is the status of such inquiry/investigation? Reply to the Point No.2 and 3:- Inquiry follow up is under progress. - 14 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 04 Is it correct that the inquiry/investigation referred In this application was closed on or before 2015? 05 What is the status of the scrutiny letter issued against the company? 06 Was any follow up communication issued to the company with respect to the scrutiny letter? 07 Please provide the order of the Regional Director, Ministry of Corporate Affairs, South Region transferring the files related to inquiry (if any) against the company from Registrar of Companies, Chennai to Registrar of Companies, Bangalore. 08 Please provide details of any action taken/communication issued by the RD/ROC basis the abovementioned follow-up letters. 09 Please provide communication issued by the Ministry of Corporate Affairs, Union of India to the RD/ROC with respect to any pending inquiry/investigation/ prosecution against the company. 10 Please provide any order/sanction for prosecution/details of prosecution issued/initiated by the RD/ROC/Central Government against the company. Reply to the Point No.4 to 10:- It is stated that the Inquiry follow up is under progress in this matter. Therefore, it is not possible to provide the information as per the provisions of Section 8 (1)(h) of the RTI Act, 2005. 2. Moreover, it is also stated that the aforesaid RTI information is in the nature of a question or query and Section 2(f) of RTI Act which defines 'information' does not include question/queries. - 15 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 3. Further, it has been seen that in the furnished 02 Indian Postal Orders (IPO), the details of column "Pay To" is incorrect. Therefore, the Indian Postal Orders Number 18 G 333961 for Rs.20/- (In original) and 18 G 333962 for Rs.20/- (In original) is hereby returned to you. The IPO/DD should be drawn in favour of "Pay and Accounts Officer, MCA, Chennai". Accordingly, the application under the RTI Act has been disposed of. 4. Shri A.K. Sahoo, Joint Director, Office of Regional Director (SER), Hyderabad, Ministry of Corporate Affairs, Corporate Bhavan, 3rd Floor, GSI Post, Thattiannaram Village, Hayatnagar Mandal, Bandlaguda, Nagole, Hyderabad, Telangana-500068 is the First Appellate Authority in this matter. Encl:- IPO No.18 G 333961 and IPO No.18 G 333962 for Rs.20/- both (In original)." The status of the application is said to be pending and to the question regarding whether there is any pending investigation against the company, the reply is 'Inquiry follow up is under progress'. Again, for the other questions, the reply is that 'Inquiry follow up is under progress'. Therefore, it is not possible to provide information under the RTI Act. The petitioners file an appeal against the said order. Noticing the said application is not necessary at this juncture. What the petitioners received during the pendency of the appeal against the order under the RTI Act are the impugned compounding notices dated 01.07.2024 and 13.07.2024. The notice dated 01.07.2024 reads as under: - 16 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 "SHOW CAUSE NOTICE FOR VIOLATION OF SECTION 211 R/W SCHEDULE VI OF THE COMPANIES ACT, 1956 (hereinafter referred to as "the Act") 1. Whereas, AB MAURI INDIA PRIVATE LIMITED U15419KA1960PTC067196 (hereinafter referred to as "the Company") was incorporated on 31/03/1960 under the jurisdiction of Registrar of Companies, Karnataka and its Registered Office is presently situated at Plot.No - 218/219, Bommasandra Jigani Link Road Rajapura Hobli, Jigani, Anekal Taluk, Bangalore- 560105, Karnataka, India. 2. Whereas, the provisions of Section 211(1) and (2) of the Companies Act, 1956 stipulates that- "(1) Every balance sheet of a company shall give a true and fair view of the state of affairs of the company as at the end of the financial year and shall, subject to the provisions of this section, be in the form set out in Part I of Schedule VI, or as near thereto as circumstances admit or in such other form as may be approved by the Central Government either generally or in any particular case; and in preparing the balance sheet due regard shall be had, as far as may be, to the general instructions for preparation of balance sheet under the heading" Notes" at the end of that Part. (2) Every profit and loss account of a company shall give a true and fair view of the profit or loss of the company for the financial year and shall, subject as aforesaid, comply with the requirements of Part II of Schedule VI, so far as they are applicable thereto". 3. Whereas, during the course of Inquiry under Section 206(4) of the Act in respect of - 17 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 Financial Statement as at 31.03.2011, it is noticed that "The Managerial remuneration has increased by Rs. 34,14,704, when the company is incurring losses for the past two years and the Managerial Remuneration as per Schedule 200200 is nil, whereas under notes 402300 relating to 'Directors Remuneration and other information', the total remuneration paid to directors, excluding sitting fees, are Rs.13448704. The company has replied that the managerial remuneration of Rs. 34,14,704 has been included in the Employee remuneration benefits figure of Rs.17,27,83,415 in the Sch 200200. We have inadvertently missed to show the amount separately under the head 'Managerial Remuneration'. The company has admitted the omission". 4. Whereas, the provisions of Section 211(7) of the Act, stipulates that- " If any such person as is referred to in sub-section (6) of section 209 fails to take all reasonable steps to secure compliance by the company, as respects any accounts laid before the company in general meeting, with the provisions of this section and with the other requirements of this Act as the matters to be stated in the accounts, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to ten thousand rupees, or with both". - 18 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 5. Now, therefore an opportunity is being given to Company and officers in default to file compounding applications within 7 days from the date of this notice. Attention is invited to section 441 of the Act, which provides for compounding of offence by the Competent Authority, failing which prosecution will be launched. 6. The Notice may be served to all the Directors and officers in default for the purpose of Section 20 of the Act." (Emphasis added) The notice dated 13.07.2024 reads as follows: "SHOW CAUSE NOTICE FOR (2 COUNTS) OF VIOLATION OF SECTION 217 (3) OF THE COMPANIES ACT, 1956 (hereinafter referred to as "the Act") 1. Whereas, AB MAURI INDIA PRIVATE LIMITED U15419KA1960PTC067196 (hereinafter referred to as "the Company") was incorporated on 31/03/1960 under the jurisdiction of Registrar of Companies, Karnataka and its Registered Office is presently situated at Plot.No - 218/219, Bommasandra Jigani Link Road Rajapura Hobli, Jigani, Anekal Taluk, Bangalore- 560105, Karnataka, India. 2. Whereas, the provisions of Section 217(3) of the Companies Act, 1956 stipulates that- "The Board shall also be bound to give the fullest information and explanations in its report aforesaid, or, in cases falling under the proviso to section 222, in an addendum to that report, on every reservation, qualification or adverse remark contained in the auditors' report". - 19 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 3. Whereas, during the course of Inquiry under Section 206(4) of the Act, it is noticed that- a) The auditors in para 9(a) of their report has qualified that the company has remitted the Service tax after significant delays. You have not explained the reasons for such delay in the directors' report as required u/s 217(3) of the Act and hence liable for penal action under section 217(5) of the Act. b) In the same para the auditors have qualified that the company has not paid the undisputed income tax as disclosed in the said report for more than six months. To this qualification the directors report has not made any detailed reply as required under section 217(3) of the Act and hence liable for penal action under section 217(5) of the Act. 4. Whereas, the provisions of Section 217(5) of the Act, stipulates that- If any person, being a director of a company, fails to take all reasonable steps to comply with the provisions of subsections (1) to (3), or being the chairman, signs the Board's report otherwise than in conformity with the provisions of sub-section (4), he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to twenty thousand rupees, or with both". 5. Now, therefore an opportunity is being given to Company and officers in default to file compounding application for the afore mentioned (2 counts) of violation of Section 217(3) within 7 days from the date of this notice. Attention is invited to section 441 of the Act, which provides for compounding of offence by the Competent Authority, failing which prosecution will be launched. - 20 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 6. The Notice may be served to all the Directors and officers in default for the purpose of Section 20 of the Act." (Emphasis added) The notices indicate that in the event the petitioners would not come forward to compound the offence, prosecution would be launched. The notices indicate that during the course of the inquiry under Section 206 of the Companies Act, 1956, the petitioners have not explained the reasons for admittedly classifying managerial remuneration under the category of employee remuneration, and have also not explained reasons for delay in remitting service tax in the Director's Report as required under Section 217 of the Companies Act, 1956. The issue now would be whether the petitioners should be directed to appear before the authorities and compound the offence as directed or should the prosecution ensue. 9. Though the notices do not indicate the timeline or the assessments that are sought to be compounded, it is an - 21 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 admitted fact that the scrutiny notice was first issued in the year 2012. After the issuance of the said notices, nothing is taken forward by the authorities till the impugned compounding notices comes about in the year 2024. 10. The High Court of Delhi, on an identical circumstance, in the case of KAVI ARORA v. REGISTRAR OF COMPANIES1, has held as follows: "…. …. …. 51. Thus, the time period taken by the Regional Director to take the decision to direct the Registrar of Companies to launch prosecution cannot be excluded for the purpose of computing the period of limitation as both the Regional Director, i.e. the Central Government as well as the Registrar of Companies was competent to launch prosecution once they had knowledge of the commission of the offences as on 24th June, 2013, i.e. when the inspection reports were filed with either of them. Since for the offences under Section 211(7), 211(3A), (3B) and (3C) of the Act, no consent/sanction for prosecution from the Central Government is required. Section 470(3) Cr.P.C cannot be relied upon by the respondents. 52. The relevant part of Section 469(1) Cr. PC relating to the commencement of the period of limitation is as follows: “Commencement of the period of limitation.-(l) The period of limitation, in relation to an offender, shall commence,-- 1 2015 SCC OnLine Del 12300 - 22 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 (a) on the date of the offence; or (b) where the commission of the offence was not known to the person aggrieved by the offence or to any police officer, the first day on which such offence comes to the knowledge of such person or to any police officer, whichever is earlier : or (c) where it is not known by whom the offence was committed, the first day on which the identity of the offender is known to the person aggrieved by the offence or to the police officer making investigation into the offence, whichever is earlier.” 53. Admittedly, Section 211 of the Act is punishable with six months imprisonment and fine. Under Section 468 Cr.P.C - no Court shall take cognizance of an offence punishable with imprisonment for a term not exceeding one year from the date of offence or the date of knowledge of the offence. Admittedly, the Inspector submitted his inspection report on 24th June, 2013 and the said complaint was only filed on 18th September, 2014, after the expiry of a year from the date of knowledge of the offence as provided under Section 468(2)(b) Cr.P.C. 54. It is not mentioned in Section 211(7) of the Act rendering the offence a continuing one and the offence is complete with the failure to take all reasonable steps to secure compliance as respects any account laid before the company and such an offence is committed once and for all as and when one commits the default and the Section does not lay down that the person concerned would be guilty of an offence if he continues to carry on without compliance or that the offence continues until the requirement is complied with. The offence under Section 211(7) of the Act is not in the nature of a continuing offence since the ingredient of continuance of the offence is absent unlike in Sections 113, 162 and 168 of the Act." (Emphasis supplied) - 23 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 10.1. Long before the judgment of the High Court of Delhi, the High Court of Madras, in the case of C.K. RANGANATHAN v. REGISTRAR OF COMPANIES2, has held as follows: "…. …. …. 9. Section 211(2) of the Companies Act requires every company to give a true and fair view of the profit and loss of the company for the financial year and shall comply with the requirements of Part-II of Schedule VI and the offence of the breach thereof is complete with the failure of the person concerned to take all reasonable steps to secure compliance by the company as respects any accounts laid before the company with the provisions of the section as to the matters to be stated in the accounts. Such an offence is committed once and for all as and when one commits the default. It gives rise to a single default and to a single punishment. The provision does not contemplate that the obligation to secure compliance continues from day to day until the compliance is actually met nor does it provide that continuance of business without securing compliance becomes a continuing offence. Hence, the offence under Section 211(7) of the Companies Act is not a continuing offence and there is a period of limitation for taking cognizance of such offence. …. …. …. 13. Since the offence under Section 211(7) of Companies Act is not a continuing one, the learned Magistrate ought not to have taken cognizance of the offence in the present case after the expiry of the period of limitation in view of the bar under Section 468 of Cr.P.C. and the proceedings are liable to be quashed." (Emphasis supplied) 2 2001 SCC OnLine Mad 914 - 24 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 10.2. The High Court of Madhya Pradesh, in the case of M/s HOTLINE TELETUBE AND COMPONENTS LTD AND OTHERS v. REGISTRAR OF COMPANIES3, has held as follows: "…. …. …. 4. The petitioners thereafter moved an application under Section 468(1) (b) read with Section 469(a) of Cr.P.C. seeking closure of the case on the ground that the prosecution in the light of the above factual documents appears to be barred by limitation and no cognizance could have been taken on a time barred complaint. 5. By way of the impugned order dated 13.06.2022, the Court of CJM, Gwalior dismissed the application of the petitioner under Section 468(1) (b) read with Section 469(a) of Cr.P.C holding that from the date of sanction received from the Central Government which was received on 25.05.2013 the complaint has been filed within limitation i.e. on 02.08.2013, therefore, the application filed by the petitioners has no substance and accordingly was rejected. 6. Being aggrieved by the order taking cognizance and by the order dismissing the application under Section 468(1) (b) read with Section 469(a) of Cr.P.C, present petition under Section 482 of Cr.P.C. has been filed. 7. Learned counsel appearing on behalf of the petitioners had challenged the impugned order mainly on the ground that the same was without application of mind and in view of Sections 468 and 469 of Cr.P.C., the period of limitation is one year for filing of complaint and since the complaint has been filed after expiry of such period from the date of knowledge, the same deserves to be dismissed. It was further argued that as per Section 469 of Cr.P.C., the period of limitation shall commence in case where the commission of the offence was not known to the person aggrieved by the offence, the first day on which such offence comes to the knowledge of such person 3 Misc. Criminal Case No. 39997 of 2022, disposed on 12.07.2023. - 25 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 and admittedly in the instant case from the record of the respondents the first letter written by the Registrar of the Companies to the Regional Director informing about the commission of the offence under Section 209- A(8) and (9) of the Companies Act was dated 31.03.2009. Hence, the complaint was barred by limitation and should have been thrown out at the very first instance. While placing reliance in the matter of Kavi Arora Vs. Registrar of Companies, 2015 SCC Online Delhi 12300, it was argued that there is no provision under the Act, whereby consent/sanction of the Central Government is required for prosecution of the offences under Section 209-A(8) and (9) of the Act, 1956 therefore, the complainant cannot take shelter of Section 470(3) of Cr.P.C. for exclusion of such time taken by the Central Government to give instructions/sanction to the Registrar of Companies. Further reliance first placed in the matter of Partha Ghosh Vs. Registrar of Companies and another passed on 12.12.222 in Criminal Miscellaneous Case No.5763/2014 by High Court of Delhi. He also placed reliance in the matter of State Vs. Seshamal Pandeya and others passed in criminal appeal No.327/1981 decided on 14.03.1986. 8. On the strength of above arguments, learned counsel for the petitioners submitted that the impugned order deserves to be set aside and consequently the order taking cognizance of the complaint also deserves to be set aside. 9. On the other hand, Shri Praveen Kumar Newaskar, learned Deputy Solicitor General appearing on behalf of the Respondents/Registrar of Companies opposes the submissions and states that no infirmity can be culled out from the order passed by the Court below in rejecting the application of the petitioner under Section 468 of Cr.P.C., as the learned Court below had rightly concluded that since the complaint has been filed within limitation from the date of receiving sanction from the Central Government, the same is within limitation. While placing reliance on Section 209-A(6) of the Act, 1956 submitted that since after inspection the report is required to be sent to the Central Government, necessary sanction is required to be obtained prior to filing of the complaint. To bolster his submissions he placed reliance in the matter of Anil Prakash Sahu Vs. Registrar of Companies and others passed on 11.04.2023 in criminal revision No.567/2023 of this Court as well as in the matter - 26 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 of Registrar of Companies Vs. Rajshree Sugar & Chemicals Ltd. & others, AIR 2000 SC 1643. …. …. …. 13. It would be evident that for the default every officer of the company shall be liable for punishment with a fine which shall not be less than Rs.50,000/- and also with imprisonment for a term not exceeding one year and would be disqualified for holding office in any company for a period of five years, if so convicted under the section. It is further pertinent to mention here that the said conviction is different from the convictions, where day to day fine is imposed for everyday's default. Thus, when the offence is not a continuing one, it has to be taken that the offence has taken place on a particular date on which it was committed and not subsequent to the same and the period of limitation cannot be extended by the prosecution as they choose. In the present matter since the knowledge of commission of the offence had already been acquired by the Registrar of Companies in the year 2009, the period of limitation could not have been extended till 2013 and accordingly there is no hesitation in concluding that the present complaint was hopelessly time barred. 14. With regard to the finding of the learned Court below as well as the arguments as advanced by the learned Deputy Solicitor General with regard to the sanction required for filing of the complaint relevant paragraph of the judgment cited by the counsel for the petitioners in the matter of Kavi Arora (supra) required to be taken note of which are reproduced herein-below:- "51. Thus, the time period taken by the Regional Director to take the decision to direct the Registrar of Companies to launch prosecution cannot be excluded for the purpose of computing the period of limitation as both the Regional Director, i.e. the Central Government as well as the Registrar of Companies was competent to launch prosecution once they had knowledge of the commission of the offences as on 24th June, 2013, i.e. when the inspection reports were filed with either of them. Since for the offences under Section 211(7), 211(3A), (3B) and (3C) of the Act, no consent/sanction for prosecution from the Central Government - 27 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 is required. Section 470(3 Cr.P.C cannot be relied upon by the respondents. 53. Admittedly, Section 211of the Act is punishable with six months imprisonment and fine. Under Section 468 Cr.P.C - no Court shall take cognizance of an offence punishable with imprisonment for a term not exceeding one year from the date of offence or the date of knowledge of the offence. Admittedly, the Inspector submitted his inspection report on 24th June, 2013 and the said complaint was only filed on 18th September, 2014, after the expiry of a year from the date of knowledge of the offence as provided under Section 468(2)(b) Cr.P.C. 54. It is not mentioned in Section 211(7) of the Act rendering the offence a continuing one and the offence is complete with the failure to take all reasonable steps to secure compliance as respects any account laid before the company and such an offence is committed once and for all as and when one commits the default and the Section does not lay down that the person concerned would be guilty of an offence if he continues to carry on without compliance or that the offence continues until the requirement is complied with. The offence under Section 211(7) of the Act is not in the nature of a continuing offence since the ingredient of continuance of the offence is absent unlike in Sections 113, 162 and 168 of the Act. 56. For the computation of the period of limitation the respondents have placed reliance on Registrar of Companies, Karnataka v. Fairgrowth Agencies Limited, (supra). The said case can be distinguished from the present case as in the present case, both the Central Government as well as the Registrar of Companies had knowledge of the offence on 24th June, 2013 when the Director (Inspection and Investigation) submitted its report. As per Section 621 of the Act, cognizance of any offence, against the Signature Not Verified Company can be taken on the complaint in writing of the Registrar, or of a shareholder of the company, or of a person authorized by the Central Government in that behalf, both the Central Government as well as the Registrar of Companies were competent to prosecute the Company as contemplated under Section 621(1) of the Act, but instead they slept over it and the complaint was filed by the Respondents only on 18th September, 2014 which was beyond the prescribed period of limitation. 57. In response to the same the petitioners have placed reliance on Webcity Infosys Ltd. v. Registrar of Companies (Delhi and Haryana) (supra) wherein it has been held by the Court that "Limitation has to commence when actionable - 28 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 knowledge is gained by the competent authority". The Competent Authority in the present case includes the ROC and admittedly actionable knowledge was gained by the ROC on 24th June, 2013 when the Director (Inspection & Investigation) submitted its report to both the Regional Director (Central Government) as well as the ROC. 58.xxxx 59.xxxx 60.xxxx 61.xxxx 62.xxxx 63. The said plea of the petitioners is correct in law as an offence under Section 211 is not a continuing offence and is complete the moment the Balance Sheet in question is issued by the Company unlike offences under Section 113,162 and 168 of the Companies Act, 1956 which are continuing in nature. Reliance is placed on C.K. Ranganathan v. Registrar of Companies-2003 (4) SCL 500 (Mad) wherein it was held as under- "13. Since the offence under Section 211(7) of the Act is not a continuing one, the learned Magistrate ought not to have taken cognisance of the offence in the present case after the expiry of the period of limitation in view of the bar under Section 468 of the Cr. PC and the proceedings are liable to be quashed." 64. As per the complaint, the Regional Director by his letter dated 2nd June, 2014 directed the respondent No. 1 to lodge prosecution. However, despite issuance of the said instruction, two show-cause notices dated 17th June, 2014 and 21st August, 2014 were issued by the respondent No. 1 to the Company and its various officers. The said show- cause notices were duly replied to vide replies dated 5th August, 2014 and 1st September, 2014 respectively. The Company also wrote a letter dated 13th August, 2014. The reference of replies as well as the letter dated 1 st September, 2014 does not even find a mention in the complaint. The explanation only given by the counsel for the respondents is that admittedly complaint do not mention about the replies given by the petitioners. However, the same are annexed with complaint. 65. The offences in the present case are not continuing in nature, limitation commenced as per Section 469(1)(b) Cr.P.C. when actionable knowledge was gained by the competent - 29 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 authority i.e. when the Registrar of Companies had knowledge of the commission of the alleged offences, i.e. 24th June, 2013 when the Registrar of Companies received the report of the Inspector and ran out on 23rd June, 2014 and thus the complaint, which was admittedly filed on 18th September, 2014 was hopelessly barred by limitation. There is no provision under the Act whereby any consent/sanction of the Central Government is required for prosecution of the offences under Section 211(7), 211(3A), (3B) and (3C) of the Act. Therefore, the complainant cannot take shelter of Section 470(3) Cr.P.C. for exclusion of such time taken by the Central Government to give instructions to the Registrar of Companies. 66. The complaint is based on the inspection report of the officer. Consequently, in the present case, there is no issue of fact at all with regard to the date of knowledge of the offence to the Registrar of Companies. The complaint is, therefore, time barred. 67. The impugned summoning orders and other proceedings emanating from the said orders against the petitioners are accordingly quashed. 15. Apart from the finding given in the above enunciation, no other provision under the Act, 1956 is available which mandates prior sanction of the Central Government for prosecution of the offence under Section 209A (8) and (9) of the Companies Act, 1956, therefore, there is no reason to take a different view as that has been taken in the matter of Kavi Arora (supra). This finding also finds strength from the provisions as contained in Section 621 of the Act, 1956, wherein Registrar is one of the parties on whose complaint the Court shall take cognizance of the offence under the Act, 1956. Thus, the ground for rejection of the application filed by the petitioners for dismissing the complaint that the same was filed within limitation from the date of sanction appears to be per se illegal. The judgments cited by the counsel for the respondents move in different factual realm, therefore they are of no assistance to the cause of respondent." (Emphasis supplied) - 30 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 In the light of the law as elucidated by the High Courts as noted hereinabove, what would unmistakably emerge is an actionable knowledge which comes about twelve years ago, cannot be permitted to be continued against the petitioners on the sole ground of delay in initiating the proceedings. I am in respectful agreement with the law as laid down by the High Courts quoted herein above. 11. The compounding notices, having been issued twelve years after the issuance of scrutiny notice are rendered unsustainable on the ground of delay, in the light of the law elucidated by different High Courts. Therefore, the petitions deserve to succeed by quashment of the compounding notices. Insofar as the consequential reliefs are concerned, it is for the authorities to decide, in accordance with law. 12. For the aforesaid reasons, the following: ORDER [i] Writ Petitions are allowed-in-part. [ii] In W.P.No.20069/2024, compounding notice vide Annexure-A bearing Reference Number F.No. - 31 - HC-KAR NC: 2025:KHC:42141 WP No. 20069 of 2024 C/W WP No. 19080 of 2024 ROCB/S.217(3)/AROC(N.H)Z01600482/AB MAURI/FU/2024 dated 13.07.2024 issued by respondent No.1 stands quashed. [iii] In W.P.No.19080/2024, compounding notice vide Annexure-A bearing Reference Number F.No. ROCB/S.211/AROC (N.H) Z01600482/AB MAURI/FU/2024 dated 01.07.2024 issued by respondent No.1 stands quashed. [iv] The application of the petitioners seeking shifting of registration shall merit consideration at the hands of the respondents, in accordance with law, bearing in mind the observations made in the course of the order. Ordered accordingly. Sd/- (M.NAGAPRASANNA) JUDGE CBC List No.: 1 Sl No.: 67